The BIOTECH Equity Strategy Practices Survey provides two types of comprehensive compensation information specifically geared towards life science companies: complete equity strategy information and executive pay and practices information. The results of this survey will be invaluable for those responsible for the company’s equity programs and to those involved in the executive compensation process.
1. 2008 BIOTECH
Equity Strategy Practices
Survey
Executive Summary
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P 858-484-3636
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CONSULTING SURVEYS FORUMS
2. INTRODUCTION
Thank you for participating in the 2008 BIOTECH Equity
Strategy Practices Survey. The survey provides equity strategy
information, specifically geared towards biotech companies. The
results of this survey will be invaluable for those responsible for the
company’s equity programs or involved in the executive
compensation process.
We are committed to making this survey the “gold standard” for
equity strategy information for biotech companies; and plan to
continue the expansion of our participant base. Toward this end:
This year, we are providing biotech-only data via this survey
to better reflect the unique pay characteristics of the
industry. Other life sciences companies are found in our
medical technology survey.
We are taking this survey to the web next year. Online
submission and on-demand reporting will be available for
participants.
We are providing quarterly, web-based “hot topic” surveys
as part of the annual survey subscription.
We are creating a Client Advisory Board (CAB) to provide
an opportunity for networking among Remedy
Compensation Consulting leadership and clients about
strategic HR and compensation issues and how to react to
them; and make sure our consulting services and surveys
are fulfilling a genuine need.
If you have any questions regarding the findings, are interested in
becoming a member of the CAB, or have ideas for the future
direction of the survey, feel free to contact us. We look forward to
Jeremy Anderson
working with you on and having you participate in future editions of
Principal
this survey.
152 N. Cedros Avenue
Solana Beach, California 92075
P (858) 484-3636
F (858) 484-3611
C (858) 337-0429
janderson@remedycomp.com
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3. PARTICIPANT LIST
Affymetrix Martek B ios ciences Corporation
Anacor P harmaceuticals Metabas is T herapeutics
AviaraDx Molecular Medicine R egeneron P harmaceuticals
B ioS ante P harmaceuticals S ciele P harmaceuticals
CV T herapeutics S epracor
Cylene P harmaceuticals S enomyx
DuP ont S equella
Illumina T ikvah T herapeutics
KAI P harmaceuticals T rius T herapeutics
MacuS ight
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4. EXECUTIVE SUMMARY
Nineteen biotechnology companies participated in the 2008 edition of this survey. These participants include
pre-IPO and public companies.
Pre-IPO grant practices
Half of the pre-IPO companies surveyed have most recently completed round A of financing. Sixty-three percent
(63%) have activity focused in phase I/II clinical trials. The table below shows the new hire grants to executives,
represented as a percentage of total common shares issued and outstanding:
New Hire Grants to Executives
Survey Job Title % of Company
25th Percentile 50th Percentile 75th Percentile
CEO (founder) 7.5% 10.0% 16.4%
CEO (non-founder) 3.6% 5.0% 11.8%
Top Financial Executive 1.4% 2.0% 2.3%
Top Research & Development Executive 2.1% 2.2% 3.3%
Top Clinical Research/Medical Affairs Executive (MD) 1.2% 1.3% 1.4%
Top Business Development Executive 0.8% 1.2% 1.7%
Public company ongoing grant practices
Ninety-one percent (91%) of public companies have formal ongoing equity grant guidelines for executives,
directors, and managers. Formal ongoing grant guidelines are less common for individual contributors, but still
prevalent in over half of companies surveyed. Stock options and RSUs are the major vehicle types for ongoing
grants for executives and directors. At the manager level and below, restricted stock units are more popular. All
executives and directors are eligible for ongoing grants, as is over 70% of the general employee population. All
executives and 97% of directors actually received grants, as did over 65% of the general employee population.
A majority of the companies (67%) make ongoing grants on an annual basis. Half of companies surveyed
directly tie the size of the ongoing grant to performance ratings. Typical vesting schedule for ongoing grants is
four year vesting in annual increments.
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5. EXECUTIVE SUMMARY
Public company new hire grant practices
Over 60% of companies have formal new hire equity grant guidelines. 100% of exempt employees are eligible
for new hire grants and 86% of non-exempt employees are eligible. Participation is virtually 100% across the
organization with the exception of non-exempt employees and certain executives. The target number of shares
for a new-hire executive is 15,000 at median, with a median value of $53,483. The primary equity vehicle
continues to be stock options. Typical vesting schedule for ongoing grants is four year vesting in annual
increments.
Promotional grants
Few companies (40%) have formal promotional equity grant guidelines and prevalence is highest at the
manager level and below. Some of these companies use a percentage of the midpoint between the new and old
salaries based on new hire or ongoing grant guidelines to determine the size of the promotional grant. Others
base the size on a promotion structure, or they have a fixed amount per title.
Aggregate stock option utilization
Median gross burn rate is 2.4% and net burn rate is 1.7%. At median, issued overhang is 11.6% and fully
diluted overhang is 15.7%. Only 18% of companies have a specified target annual burn rate. For those
companies with a set target gross burn rate, the median is 4.7%.
Employee stock purchase plan (ESPP)
45% of companies offer employees the opportunity to participate in an Employee Stock Purchase Plan (ESPP). At
median, companies provide a 15% discount on the purchase of shares. The median look-back period is 24
months. At median, companies have 2% of total common shares issued and outstanding reserved for use under
the plan.
Additional shares request to shareholders
45% of participants requested additional shares last year. At median, 6.1% of total common shares issued and
outstanding were requested. Requests ranged from 1.8% to 6.3% (25th percentile to 75th percentile). 100% of
the requests were approved.
Equity ownership guidelines
Less than twenty percent (20%) of companies have formal equity ownership guidelines for executives. For those
with formal guidelines, the basis for equity ownership is a multiple of base salary. At median, the guidelines are
450% of base for the CEO, 350% of base for direct reports to the CEO, and 300% for all other non-direct
report executives. Most companies allow four years to meet the equity ownership guideline requirements.
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6. REMEDY COMPENSATION
CONSULTING
ABOUT REMEDY
Remedy is a leading compensation consulting firm. We partner with private, pre-IPO and publicly traded companies that are intent
on improving the link between their people, how they are paid and how that ultimately translates into company success. Our clients
benefit from fact-based consulting advice rooted in industry experience.
CONSULTING
Remedy specializes in the following areas of compensation:
CLIENT LIST
• Assistance to the Board of Directors
• Executive compensation Below is a representative list
of our recent clients:
• Sales compensation
• Workforce compensation • Alphatec Spine
• Anacor Pharmaceuticals
• Equity strategies
• Beckman Coulter
Our services can include the following, depending on your needs:
• BIOCOM
• Working with leadership — to establish pay strategies • BioSante Pharmaceuticals
• Conducting competitive assessments — comparing pay levels and program • Bio-Rad
characteristics to market norms • Buzztime
• Designing or refining plans — defining plan characteristics and payout mechanics in • Cardica
support of plan objectives • CooperVision
• Conducting financial modeling — to understand the financial impact of potential • Digirad
changes for both the company and plan participants • Dot Hill
• Exelixis
• Drafting plan documentation — ensuring a common understanding for participants
• Hay House
and those responsible for administering the plan
• Illumina
SURVEYS • Inverness Medical Innovations
• Karl Storz
We believe market data is an important component in the advice we provide. In turn,
• Life Technologies
Remedy offers in-depth surveys for select industries, including the life sciences and high-
• Metabasis Therapeutics
technology industries. Our suite of surveys provides you with comprehensive information,
• Neurocrine Biosciences
designed to support decision making. Our surveys include:
• Quake Global
Medical Technology
• REMEC
• MEDTECH Sales Compensation Survey • San Diego Blood Bank
• MEDTECH Equity & Executive Compensation Survey • Senomyx
• Silicon Image
Biotechnology
• Somaxon
• BIOTECH Equity & Executive Compensation Survey
• Synthetic Genomics
RemedyASAP Surveys • US Endoscopy
• For companies seeking specialized information, we offer custom survey capabilities.
Through our industry connections, we are able to deliver high participant-count, high
quality findings.
FORUMS
Remedy understands the need for industry-specific events and the desire of professionals to get to know their peers at other similar
companies. We are committed to providing those opportunities to get to know one another, develop professionally, keep abreast of
changes in the marketplace and discuss the issues that directly impact your organization.
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7. REMEDY COMPENSATION
CONSULTING
ABOUT REMEDY
LEADERSHIP BIOS
Jeremy Anderson is a Principal for Remedy Compensation Consulting. Jeremy advises clients in the areas of executive
pay, equity strategy design and sales force compensation. His experience includes the design and implementation of sales
compensation programs, equity strategies, base pay structures, short-term incentives and performance management
systems. In addition, he assists clients with the development of organization-wide communication strategies in support
of new program launches. Prior to founding Remedy, Jeremy was a consulting principal with Top Five Data Services, Inc.,
a consultant with iQuantic in their San Francisco office, and was a senior consultant in Arthur Andersen’s Human Capital
Service practice. Jeremy holds a B.B.A in both Finance and Organizational Behavior & Business Policy from Edwin L. Cox
School of Business, Southern Methodist University.
Ted Ginsburg is a Principal for Remedy Compensation Consulting. Ted focuses on executive compensation consulting
for both publicly traded and privately held employers, specializing in employment agreements, non-qualified deferred
compensation plans, SEC filings, change of control programs and equity based arrangements. Prior to founding Remedy,
Ted served as a consulting principal for Top Five Data Services, Inc., the national executive compensation practice leader
for Buck Consultants, co-national practice leader of employee benefit consulting with Grant Thornton LLP, an employee
benefits tax partner with KPMG, a partner and employee benefits practice head of Laner Muchin et. al and of counsel with
Mayer Brown & Platt. Ted is an active public speaker and has published articles in such periodicals as MX Magazine and
the Tax Advisor. He is a licensed attorney and a Certified Public Accountant, and holds AB, MBA and JD degrees from
Washington University in St. Louis, Missouri.
Ken Wechsler is a Principal for Remedy Compensation Consulting. Ken advises clients in the areas of executive and board
compensation, incentive and sales compensation, and broad-based compensation program design. In addition, to working
a significant portion of his career at three prominent HR consulting firms (Mercer, Watson Wyatt and Towers Perrin), Ken also
has significant Corporate experience as the Head of Compensation and Benefits for two Fortune 500 employers (Science
Applications International Corp and Gateway). Ken’s a frequent speaker on a variety of compensation and benefits topics.
He’s a member of World-at-Work’s national faculty, teaching their “Total Rewards” (T-1) and “Quantitative Methods” (T-3)
courses. He received his undergraduate degree at Claremont McKenna College with dual Bachelor Degrees in Economics
and Mathematics.
For more information, please contact any of our Principals:
Jeremy Anderson Ted Ginsburg Ken Wechsler
858-484-3636 440-720-0898 858-755-8675
janderson@remedycomp.com tginsburg@remedycomp.com kwechsler@remedycomp.com
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